ICT Zone Ventures Scheme

Our firm is proud to have assisted a fast-growing technology-based SME to successfully obtain the relevant approvals from the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia) to establish Malaysia's 1st ICT Interest Scheme. 

The fact sheet for the ICT Zone Ventures Scheme is set out in tabular form below-

Issuer & Management Company	ICT Zone Ventures Berhad
Core business activity	Rental of ICT equipment to government agencies, statutory bodies and private sector corporations
Objective of fundraising	To finance business growth in the ICT rental sector
Regulator	Suruhanjaya Syarikat Malaysia (SSM)
Principal legislation for the Scheme	Companies Act, 1965
Total approved fund size	RM110 million
Total no. of approved ICT Interests	22,000 ICT Interests
Investment value per ICT Interest	RM5,000
Investment returns	8% Fixed Nett Yield annually per ICT Interest
Term	Fixed period of 9 years
Capital protected	Cumulative 9-years Redemption Reserve Fund managed by Trustee
Management of funds	All investment funds received will be managed by the Trustee and released to the Management Company
Transferability	Fully transferable after initial 3-years lock-in period
Buy-back guarantee	Buy-back of ICT Interests after initial 2-years lock-in period
Cooling-off period	10 days
Eligibility to invest	Both Malaysians and non-Malaysians
Frequency of audit	Every 6 months
Approved Scheme Trustee	My Premier Trustee (Malaysia) Berhad (719395-T)
Independent Consultant	PKF Accountants (AF 0911)

For more information on the ICT Zone Ventures Scheme click on the link HERE.

VAT (or GST) and its implications

Source: Edge Daily

Consumption tax is tax charged on consumers for goods and services purchased by them. Since the early 1970s, Malaysia has imposed the single-stage consumption tax, called sales and service tax (SST). Sales tax is imposed on goods manufactured in or imported into Malaysia and service tax on services rendered in Malaysia. The cost of the SST is embedded in the selling price of the goods to recover the additional cost.

In 2005 the government announced that VAT (value-added tax), also called GST (goods and services tax) was to be adopted to replace SST effective January 2007. 

VAT or GST is considered theoretically sound as it avoids tax cascading, multiple taxation and transfer pricing bias. Consequently, it has been adopted by over 130 countries. 

GST is also said to help enhance tax compliance and reduce tax avoidance and tax evasion. GST, as a consumption tax, is finally borne by the consumers. Businesses will not have to bear GST but they have to help collect the tax, account for and remit the tax to the government during the supply chain. 

GST is broad-based and is imposed on the value-add of almost all goods and services, said to cover everything under the sun. The collection of the GST is practically carried out by all the businesses. Businesses pay GST (called input tax) on all their purchases (i.e. input goods and services) needed to conduct their business. They will then charge and collect GST of, say 4%, on the selling price of their outputs (called output tax) on sales of such goods to their buyers, which can be another business or final consumers.  

If the output tax collected is more than the input tax paid, the difference will be remitted to the government. Conversely, if the input tax paid is more than the output tax collected, the businesses will get refund of the difference from the government.

The implementation of the multi-stage GST is complex. There are three types of supplies — standard-rated, zero-rated and exempted supplies — each with different applicable rules. The businesses will need to register with the authority to be able to secure refund for input tax paid on their purchases. Exempted businesses are not to be registered, not entitled to claim input tax refund and are not allowed to charge output tax on their sales (so they will have to increase their selling price to recover the input tax paid on their purchases). Zero-rates supplies mainly refer to export sales on which no GST will be charged (and so all related input tax will be refunded by the government).

There are many other provisions, reliefs, refund schemes, remissions, special treatment for certain businesses (e.g. construction and property businesses), etc.  Most businessmen, large or small ones, will need to pay the GST tax consultants to help them comply with the laws and rules. This is so even in the advanced country like New Zealand.

There are so many concerns and considerations expressed that the government has not implemented GST since announcing it in 2005. Hong Kong also announced its plan to adopt GST in 2007 and has since kept quiet on its implementation.

The various concerns included:

1. Indirect tax like GST is regressive in that the poor and the rich pay similar rate of tax on similar items, even basic necessities;

2. Based on the past experience of other countries, GST will usually lead to higher inflation;

3. Income disparity among Malaysians is still very great — less than 20% working Malaysians earn more than the threshold to have to pay income tax. When income tax rates are reduced subsequent to the imposition of GST, only those rich ones can benefit from such tax rate reduction.

4. High cost of compliance by the businesses will affect their competitiveness. They will invariably pass the cost to consumers, causing higher inflation;

5. High cost of administration and enforcement of GST  by the government may not help reduce its budget deficit;

6. Malaysians are concerned about the tendency of GST rates increase. Singapore started with 3% and has since increased to 7%, an increase of 130%. Certain European countries kept increasing the GST rate to the current rate of 25%.

7. The fraud and refund mechanism has led to substantial loss and leakage even among the advanced nations. The UK suffered a loss of about £11.9 billion (RM59.2 billion) in one year. The US government did two studies on the possibility of introducing GST in 2004 and 2008 and had so far not decided on adopting GST. 

8. The refund mechanism is a fertile source of fraud, as the source document is only the invoice of a company. As more frauds are detected, increased levels of checking will make it impossible for Customs to adhere to the 14 day refund timeline, thereby affecting competitiveness

9. Both the export and SME sectors will likely be affected due to high cost of compliance and loss of competitiveness

The government will certainly do an in-depth study, perhaps at a special lab to devise measures to deal with the aforesaid concerns.

Datuk OK Lee is the northern branch chairman of the Federation of Malaysian Manufacturers.

A less gilded future?

Sourced from the Economist-

TWO years ago Howrey was one of the world’s 100 biggest law firms by revenue, with nearly 700 lawyers in eight countries. Profits exceeded $1m per partner. The American firm, which specialised in intellectual-property suits, had had several spectacular years in a row. But in 2009 profits were much less than expected and angry partners began to leave. Defections continued during the recession. After failed merger talks, Howrey shut its doors this March.

Though Howrey was the only big firm to collapse, the forces that destroyed it hit the whole profession hard. Work on mergers and acquisitions (M&A) dried up and nothing similarly profitable took its place (bankruptcy, securities litigation and regulation were rare bright spots). Clients became keener to query their bills—and to demand alternatives to the convention of charging by the hour, such as flat, capped or contingent fees. Small and innovative firms began obliging them, and big firms increasingly felt forced to follow suit.

All this took a toll on the labour market. After a dozen years of growth, employment in America’s law industry, the world’s biggest, has declined for the past three years (see chart 1). The 250 biggest firms, according to an annual survey by the National Law Journal, shed more than 9,500 lawyers in 2009 and 2010, nearly 8% of the total. Many also deferred hiring, leaving new graduates in a glutted market. Legal-process outsourcing firms, which do not advise clients but do routine work such as reviewing documents, put further downward pressure on the demand for their talents. The pain was felt in Britain, easily the biggest legal market after America, and other countries too.

But not all the trends that have hit the legal industry are cyclical. Some are here to stay even as the economy recovers. One is clients’ determination to keep their bills down. Feeling that they had overpaid vastly for the work of green trainees, they began refusing to have routine work billed to first- and second-year associates (ie, lawyers who are not yet partners). They see no reason to stand for it again. And alternative fee arrangements continue to grow in importance, albeit slowly: they accounted for 16% of big firms’ revenue in 2010.Lawyers would like to believe that the worst is over and that no more of them will suffer Howrey’s fate. Work on M&A and initial public offerings has recovered from dismal levels. And according to American Lawyer, profit per partner at America’s 100 biggest firms rose by 8.4% last year, having fallen by 4.3% in 2008 and gone up by a measly 0.3% in 2009.

Competition Act and Anti-Profiteering Act

THE Competition Act 2010 and the Price Control and Anti-Profiteering Acts 2010 will completely change the way business is conducted in Malaysia if fully implemented as expected by next year as they help pave the way for greater innovation and service to consumers at competitive prices.

The Competition Act 2010 took over 15 years to be implemented in Malaysia due to legacy issues such as industrial policies and protectionism given to selected industries such as the construction and transportation.

The urgency to implement such an Act, albeit later than neighbouring countries such as Singapore, Indonesia and Thailand, finally came when it was clear that foreign direct investments into the country had dwindled as a result of previous industrial policies providing protectionism over selected sectors and giving rise to anti-competitive behaviour.The main thrust of the Competition Act is to promote a competitive market environment and provide a level playing field for all players in the market, which in the process will squash anti-competitive practices such as cartels and collusions.

As government-linked companies (GLCs) are said to make up 40% of domestic economic activity, the private sector was only keen for the Competition Act to be implemented if GLCs also fell under the scrutiny of the Act.

The real push for this Act to take place came in 2007 and the initial plan was to have a Fair Trade Practices Bill encompassing elements of the Competition Law. However, this was further refined two years ago to have a standalone Competition Act after the Domestic Trade, Cooperatives and Consumerism Ministry consulted a group of 25 interested parties from the private sector as well as government agencies.

SC urges public not to part with monies to unlicensed investment agents

The Securities Commission Malaysia (SC) urges the public not to part with monies to unlicensed investment agents, even if recommended by family members and friends.

In this regard, the SC wishes to remind the public that Uzir bin Abdul Samad, (IC No : 720824-01-5543) and UAS Bistari Management Sdn Bhd (806034-H) are not licensed by the SC to carry out any regulated activity including soliciting monies from the public for investment in securities.

The public is reminded to be wary of investment schemes promising unrealistically high returns. Where such schemes are purportedly linked to licensed intermediaries, investors are advised to verify the legitimacy of such schemes with the licensed intermediary concerned or with the SC.

We would like to remind the public that persons who are not licensed by the SC are not allowed to collect monies from others for investment in a portfolio of securities on their behalf. The public is also advised not to invest in the market through the trading accounts of others, including family members and friends. Individual trading accounts are for personal use of the account holder and may not be used for any third party trades.

Anyone carrying out such activities without the requisite licenses can be prosecuted under the Capital Markets and Services Act 2007 and upon conviction is liable to a fine not exceeding RM10,000,000 or to imprisonment for a term not exceeding 10 years or both.

Source: BizStar

Freedom of speech is not freedom to defame

by Marcel Jude Joseph. Posted on February 14, 2011, Monday

Source: Borneo Post

THERE are a lot of young people in Malaysia who go around blogging under the banner of freedom of speech.

Many of these self-styled bloggers are self-righteous individuals, who have turned themselves into mini gods – they say whatever they like and show whatever they please without due consideration and respect for their elders or the unique social fabric of Malaysia.

They do a great disservice to the responsible elements of the blogging community and are pushing the government to take action to stop the abuse of the Internet.

The Federal Constitution

Malaysians should be aware that we are not the ‘US of A’. Unfortunately many so called bloggers in Malayisa and many other Internet users do not know or even care about the history of freedom of speech in our country. These bloggers are ready to shout freedom of speech but what they actually mean is freedom to defame.

Let’s get one thing clear — freedom of speech is NOT freedom to defame.

Article 10[1][a] of the Federal Constitution provides that every Malaysian citizen shall have the right of free speech and expression. Taken in isolation, it is a guarantee of that right but the guarantee is not absolute. The article reads as follows:-

1. Subject to Clauses (2), (3) and (4) — * (a) every citizen has the right to freedom of speech and expression; * (b) all citizens have the right to assemble peaceably and without arms; * (c) all citizens have the right to form associations.

2. Parliament may by law impose — * (a) on the rights conferred by paragraph (a) of Clause (1), such restrictions as it deems necessary or expedient in the interest of the security of the Federation or any part thereof, friendly relations with other countries, public order or morality and restrictions designed to protect the privileges of Parliament or of any Legislative Assembly or to provide against contempt of court, defamation, or incitement to any offence; * (b) on the right conferred by paragraph (b) of Clause (1), such restrictions as it deems necessary or expedient in the interest of the security of the Federation or any part thereof, or public order; * (c) on the right conferred by paragraph (c) of Clause (1), such restrictions as it deems necessary or expedient in the interest of the security of the Federation or any part thereof, public order or morality.

3. Restrictions on the right to form associations conferred by paragraph (c) of Clause (1) may also be imposed by any law relating to labour or education.

4. In imposing restrictions in the interest of the security of the Federation or any part thereof or public order under Clause (2) (a), Parliament may pass law prohibiting the questioning of any matter, right, status, position, privilege, sovereignty or prerogative established or protected by the provisions of Part III, Article 152, Article 153 or Article 181 otherwise than in relation to the implementation thereof as may be specified in such law.

Other restrictions

Other than the restrictions on the freedom of speech in Article 10, several acts of law regulate the freedoms granted by Article 10, such as the Official Secrets Act, which makes it a crime to disseminate information classified as an official secret.

The Sedition Act 1948 makes it an offence to engage in acts with a ‘seditious tendency’, including but not limited to the spoken word and publications. Conviction may result in a sentence of a fine up to RM5,000, three years in jail, or both.

Under the Public Order (Preservation) Act 1958, the relevant Minister may temporarily declare any area where public order is seriously disturbed or seriously threatened to be a ‘proclaimed area’ for a period of up to one month.

The police have extensive powers under the Act to maintain public order in proclaimed areas. These include the power to close roads, erect barriers, impose curfews, and to prohibit or regulate processions, meetings or assemblies of five persons or more.

General offences under the Act are punishable by imprisonment for a term not exceeding six months; but for more serious offences, the maximum prison sentence is higher (eg 10 years for using offensive weapons or explosives) and sentences may include whipping.

Other laws curtailing the freedoms of Article 10 are the Police Act 1967, which criminalises the gathering of three or more people in a public place without a licence, and the Printing Presses and Publications Act 1984, which grants the Home Affairs Minister “absolute discretion” in the granting and revoking of publishing permits, and also makes it a criminal offence to possess a printing press without a licence.

History of freedom of speech in Islam

According to prominent lawyer Choo Chin Thye, as a constitutional issue, the right of free speech will be better understood by an examination of Malaysia’s constitutional history and the events over the past 50 years. He said by examining key events in that timespan, we may better understand how the status of free speech has evolved over time in the Malaysian context.

But we must begin with an examination of the Islamic notion of free speech with two points in mind. Firstly, Islam is the official religion of Malaysia and demographically, a substantial portion of Malaysia’s population profess the Islamic faith. It is important to establish that Muslims in Malaysia are not inimical to the concept of free speech.

Secondly, the very fact that Islam embraces the notion of free speech points to the universality of this notion, that is to say, the idea of free speech is not merely a product of Western thought and values. This is certainly a revelation to both Muslims and non-Muslims alike because most Malaysians operate under a misconception that everything Western is superior to Asian and non-Western cultures, norms and spirituality.

It is important to note that the human rights schemes propounded by contemporary Islamic scholars, which includes the conceptualising of freedom of speech, is rooted on the primacy of the Koranic Revelation over the logical process of reasoning.

In the opinion of Islamic scholars, human reasoning, independent of God’s guidance and inspiration, is insufficient to provide the best plan for human life. For example, upon citing various passages of the Koran and the Sunna, Islamic scholar Muhammad Asad took the view that, in the context of Islam, the intellectual leaders of the community are morally bound to bring forward whatever new ideas they may have and to advocate such ideas in public. Therefore, the right to a free expression of one’s opinions in speech and writing is one of the fundamental rights of a citizen of an Islamic state.

Further support for this is reflected in Article 12 of the Universal Islamic Declaration of Human Rights which states that:-“Every person has the right to express his thoughts and beliefs so long as he remains within the limits prescribed by the Law. No one, however, is entitled to disseminate falsehood or to circulate reports that may outrage public decency, or to indulge in slander, innuendo, or to cast defamatory aspersions on other persons.

“It is the right and duty of every Muslim to protest and strive (within the limits set out by the Law) against oppression even if it involves challenging the highest authority in the state.”

Choo said these propositions reveal that there is sufficient evidence to demonstrate that Islamic notions including the Koran do support the principle of the freedom of speech, the only issue being the degree of such freedom. That there is a similarity between the democratic notions of free speech developed in the Western world with Islamic notions of free speech, he said, make it a universal notion.

Bursa plans found wanting

Bursa Malaysia Securities Bhd's plans to revamp some of its rules for securities brokers, even though welcomed, are found wanting by most industry players.

On January 4, the regulator posted a 27-page consultation paper seeking feedback from industry players and the public on the proposed revamp of 11 areas of focus in the stockbroking industry.

The Association of Stock Broking Companies Malaysia (ASCM) said it welcomed some changes which allow Participating Organisations (POs) greater flexibility in managing and operating their respective businesses, moving towards a framework of self-regulation.

However, most POs regard the changes as insignificant in achieving a positive outcome for the industry.

A major concern is the element of conflict of interest between the roles of an exchange as a trading platform provider and a regulator.

It urged the Malaysian securities industry exponents to explore the practices of other markets where much of the frontline regulatory roles are performed by either the governmental agencies, such as the Securities Commission, or the stockbrokers' associations.

The ASCM was responding via e-mail to questions sent by Business Times.

On the liberalisation of commission-sharing between POs and remisiers effective January 1, the ASCM suggested the regulators set a ceiling to the remisiers' commission-sharing percentage as the absence of such control will result in an environment of unhealthy competition among POs. 

The association warned that the current practice would encourage poaching activities and suggested regulators impose a transfer fee mechanism on transfers of remisiers.

The ASCM also opined that the regulators use this opportunity to resolve a couple of delivery and settlement issues as well as look into the reduction of certain costs imposed on securities brokers.

It asks that regulators match the time of payment to selling client, and delivery of securities to buying client.

"Currently, there is a gap of about 2.5 hours and this is a concern to many, especially the foreign clients, as there is a lot of risks involved even within this short period," ASCM said.

It also suggests that POs be allowed to amend the contract on T+1 to avoid high instances of buying in, especially in a situation where the beneficial owner is the same.

This will also assist in resolving settlement issues faced by the foreign clients, where trades are done via intermediaries (inter-brokers). 

The association believes that Bursa Malaysia would greatly enhance and foster the growth of the industry if some five costs, which include Access Fees and Monthly/Annual Subscription Fees for CDS and dealings, be reduced in the sea of other escalating costs already faced by the industry.

The window period for feedback for the consultation paper ends tomorrow.

Read more: Bursa plans found wanting http://www.btimes.com.my/articles/psb1/Article/#ixzz1EBEiqgdr